Daily market review

United States

Equities were mostly lower Wednesday on profit-taking pressures headed into the US holiday weekend after recent gains. The Dow Jones industrial index declined 0.6 percent, the S&P 500 eased 0.2 percent, and the NASDAQ 100 gained 0.5 percent.

Cyclical/value stocks that have led the rally this month saw moderate selling pressure while mega-caps and momentum plays held up better. Mega-caps have been relatively out of favor lately as investors rotated into cyclicals on the reopening trade.

Energy and financials, the best performers lately, lagged the most Wednesday while technology out-performed. Apple gained 0.8 percent, Amazon rose 2.2 percent, and Tesla gained 3.4 percent.

On a busy day for US economic reports, the numbers came in mixed. On the negative side, jobless claims rose by 30,000 to 778,000 in the latest week, well above expectations. On the positive side, durable goods orders rose by 1.3 percent in October after an upward revised 2.1 percent monthly increase in September, beating Econoday's consensus for a 0.9 percent gain. Separately, new home sales again exceeded expectations, with the annual sales rate for October coming in at 999,000, above Econoday's consensus forecast for 975,000, and only 0.3 percent below September's upward revised annual rate of 1,002,000.

Among companies in the news, Gap, the clothing retailer, fell 20 percent after an earnings miss and again offering no earnings guidance. On the positive side, Slack, the software company, soared 38 percent on a report it may be acquired by Salesforce.com, which fell 5.4 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 74 cents to US$48.66 while spot gold fell US$1.09 to US$1,806.52. The US dollar fell against most major currencies but gained vs. the Canadian dollar. The US Treasury 30-year bond yield rose 2 basis points to 1.63 percent while the 10-year note was steady at 0.88 percent.


Equities were narrowly mixed Wednesday with UK stocks lagging on Brexit worries. The Europe-wide STOXX 600 declined 0.1 percent, the German DAX was unchanged, the French CAC gained 0.2 percent, and the UK FTSE-100 declined 0.6 percent.

European equities held near recent highs after rising in recent weeks on optimism over vaccines and positive sentiment linked to expectations that the UK, Germany, and France would ease lockdown restrictions headed into year-end holidays. On the downside, UK stocks reacted badly to European Commission President Ursula von der Leyen's warning that there was a risk of UK leaving the EU with no deal on Dec. 31 and that the next days "would be decisive." The two sides remain far apart on key sticking points, officials said.

Among sectors, defensive shares held up best, with utilities, personal & household goods, and telecom recovering from recent losses. Cyclicals including energy, miners, and autos retreated from recent gains. Bank stocks fell back on an ECB warning that banks may be obliged to boost reserves against credit losses despite an earlier report the ECB might allow banks to resume dividends next year.

Among companies in the news, Tullow Oil fell 4.9 percent after its latest production projection. Legal & General, the financial services, company, fell 3.8 percent on its financial update. Virgin Money UK fell 5.2 percent on an earnings miss. On the positive side, United Utilities, the UK water services company, rose 2.3 percent after an earnings beat and affirming its dividend plans.

Asia Pacific

Most major Asian market closed higher Wednesday with a bare regional data calendar keeping the focus on the record highs recorded on Wall Street Tuesday, growing confidence about the prospects for Covid-19 vaccines, and signs of reduced US political uncertainty. Japan's Nikkei and Topix indices closed up 0.5 percent and 0.3 percent respectively, while Australia's All Ordinaries index rose 0.5 percent. Hong Kong's Hang Seng index rose 0.2 percent, while the Shanghai Composite index fell 1.2 percent on the day, with performance and sentiment in these markets impacted by reports that authorities are investigating new energy vehicle projects linked to major property developers, Evergrande Group and Shenzhen Baoneng.

Looking ahead*

On Thursday in Asia/Pacific, New Zealand merchandise trade, Singapore industrial production, and Australian capital expenditures figures are due. In Europe, German Gfk consumer climate and Swiss employment reports are scheduled.

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